What is the Direct File Pilot Program?
The IRS Direct File program is a guided step-by-step system that allows eligible taxpayers to manually input their tax information and file their federal tax returns without any pre-filled data. It is exclusively for federal taxes and does not support state tax filings.
Who Can Use Direct File?
Eligible States
For 2023, the program was available to residents of these pilot states:
- Arizona
- California
- Florida
- Massachusetts
- Nevada
- New Hampshire
- New York
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
Identification Requirements
To ensure security and prevent fraud, taxpayers need the following:
- A Social Security Number (SSN), Individual Taxpayer Identification Number (ITIN), or Adoption Taxpayer Identification Number (ATIN).
- A government-issued ID, such as a driver’s license or passport.
- An IRS Identity Protection PIN (if applicable).
Income Limitations
Taxpayers with specific types of income are eligible, including:
- Wages (Form W-2).
- Unemployment benefits (Form 1099-G).
- Social Security benefits (Form SSA-1099).
- Up to $1,500 in interest income (Form 1099-INT).
However, Direct File excludes taxpayers with income from independent contracting, gig work, rental income, pension distributions, or payment apps (Forms 1099-NEC, 1099-MISC, or 1099-R).
Additional income restrictions apply:
- Individual wages exceeding $200,000.
- Married Filing Separately wages over $125,000.
- Joint filers with combined wages exceeding $250,000.
Deductions and Credits Supported
Taxpayers can only claim the standard deduction and certain adjustments like student loan interest and educator expenses. Itemized deductions are not supported.
Eligible credits include:
- Child Tax Credit.
- Earned Income Credit (EIC).
- Credit for Other Dependents.
Health Insurance and Other Limitations
Direct File supports taxpayers with employer-provided insurance, Medicare, Medicaid, Veterans Affairs healthcare, or private insurance. However, it cannot process returns for taxpayers with Health Savings Accounts (HSAs) or Marketplace insurance (Form 1095-A).
Getting Started with Direct File
To use the program, taxpayers must create a secure IRS account through ID.me, which includes identity verification steps such as uploading government-issued ID and completing a video selfie.
What This Means for Taxpayers
While the Direct File Pilot Program simplifies federal tax filing for eligible taxpayers, it has limitations. Taxpayers with more complex financial situations or those requiring state tax filing will need additional solutions.
At PaperWerks, we can help you navigate these changes, determine if you’re eligible for Direct File, or assist with more comprehensive tax preparation services tailored to your needs.
Stay informed and file with confidence—contact PaperWerks today for personalized tax support!
